SPI Insights

Blockchain technology is relatively new. However, it is having a widespread impact on state and local governments… and, it is likely to impact citizens and taxpayers in the very near future. Public officials and industry executives are now claiming that blockchain may first be transformative in the energy sector. If that’s true, it is important to understand this new technology.

Blockchain technology could be disruptive in many good ways in the energy marketplace. It is already changing how some public officials purchase, sell and promote alternative energy sources. Blockchain makes it convenient and efficient for consumers to use alternative energy sources. It also impacts sustainability – one of the highest priorities for public officials at the local levels of government.

Benefits that have resulted from the use of blockchain technology for energy include the reduction of capital expenditures, improvement of security, the lessening of operating costs, mitigation of risks and an increase of clean air power sources. All parties benefit from results such as these.

The use of blockchain technology came on strong in 2018 and the increase in usage is escalating rapidly. Public officials throughout the country are experimenting to find other uses for blockchain technology. It is being tested for more efficient procurement practices, voting and election security and to augment information related to licensing programs. Energy benefits are just icing on the cake.

The only thing slowing down the blockchain trend seems to be funding. Most local government officials don’t have available funding to invest in blockchain experimentation. Some municipal leaders are waiting for the private sector to step in and help them prove the benefits.

A recent National League of Cities report indicates that blockchain has the potential to positively impact a city’s energy sector. To accept and/or verify that claim, it’s necessary to understand how it works.

Blockchain technology increases the production of energy from renewable sources because it allows consumers from diverse backgrounds to use microgrids and energy networks for selling and purchasing power. Diverse energy portfolios can be created that allow consumers to conveniently and efficiently purchase power from almost all types of alternative energy sources – solar, wind, etc. Blockchain technology does all that by allowing for convenient and efficient peer-to-peer (P2P) sales. That results in more diversification of energy sources, efficiency and transparency related to purchasing and reporting. It also lowers power costs.

The Brooklyn Microgrid project is a good example. A utility provider in Brooklyn maintains an electric grid that delivers power to community members on the grid. Buyers and sellers can generate, purchase, store and deliver the energy conveniently. Purchasers have options to choose from various types of energy sources. Pricing is competitive and there is complete transparency as well as automated and efficient reporting.

Because it is a P2P project operated by public members, consumers who generate renewable energy with solar panels can also sell electric credits through a phone app to residents without direct access to the grid. Transactions are made through a secure, inexpensive, digital public database that can be accessed by all users. If there is a shortage of energy, a traditional power grid becomes the backup.

A P2P trading network allows individual or commercial consumers to buy and sell energy directly. Records of energy generation and usage are transparent, auditable and automated.

Similarly, four utility companies in New York are working collaboratively to share information about how blockchain technology is being used. The hope is that their efforts will lead to applications that can be applied throughout the energy industry across the state.

In Illinois, government officials are engaged in five pilot projects involving blockchain technology. One is an energy credit marketplace that allows for the tracking of renewable energy credits. Homeowners qualify for a residential energy tax credit if they install approved equipment to make their homes more energy-efficient.

Blockchain networks are still relatively new but the technology appears to have the potential to revolutionize local government in a number of areas. If power costs can be reduced while increasing the use of clean energy sources, the technology will likely be both transformative and disruptive.

Because all citizens require power, it is important to understand blockchain technology and the changes it is likely to deliver in 2019.

Since 1995, SPI’s procurement consulting services have helped companies of all sizes effectively navigate the various jurisdictions of government procurement. Contact them today to learn how they can help grow your business.

As President and CEO of Strategic Partnerships, Inc., Mary Scott Nabers has decades of experience working in the public-private sector. A well-recognized expert in the P3 and government contracting fields, she is often asked to share her industry insights with top publications and through professional speaking engagements.

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